Long-dated index tranches reached new tights last week as investors went looking for credit returns further down the yield curve. The protection selling pressure sent the 10-year CDX 3-7% tranche to 479 basis points Thursday, compared with a previous historic tight of 507 bps in May. The 10-year iTraxx 3-6% tranche traded at 394 bps Thursday, compared with 440 bps in May.
Long-dated senior tranches tightened as well, as real money accounts looked to capture both wider spreads and safer investments. Michael Hampden-Turner, structured credit and derivatives research analyst at The Royal Bank Of Scotland in London, said more than USD200 million of CDX 10-year 7-10% tranches traded Wednesday, or about twice as much as normal, and about as much as normal equity tranche volumes.
